Problem 13-24 Effect of order quantity on special order decision LO 13-2 Levy Qu
ID: 2582394 • Letter: P
Question
Problem 13-24 Effect of order quantity on special order decision LO 13-2 Levy Quilting Company makes blankets that it markets through a variety of department stores It makes the blankets in batches of 1,000 units. Levy made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized as follows Materials cost ($26 per unit x 20,000) Labor cost ($22 per unit × 20,000) Manufacturing supplies ($320,000) Batch-level costs (20 batches at $3,000 per batch) Product-level costs Facility-level costs 520,000 440,000 60,000 60,000 320,000 390,000 Total costs $1,790,000 Cost per unit-$1,790,000 + 20,000-s89 50 Required a.1. Rios Motels has offiered to buy a batch of 500 blankets for $52 each. Levy's normal selling price is $91 per unit, calculate the relevant cost per unit for the special order per unit a-2. Should Levy accept the special order? O No Yes O Type here to searchExplanation / Answer
CALCUALTION OF THE RELEVANT COST FOR SPECIAL ORDER FOR 500 ADDITIONAL UNITS Particulars Amount Remarks Material Cost = $ 26 Per Unit Relevant Cost beause it is variable cost Labour Cost $ 22 Per Unit Relevant Cost beause it is variable cost Manufacturing Supplies $ 3 Per Unit Relevant Cost beause it is variable cost Batch Level Cost ($ 1000 X 3 = $ 3,000/ 500 units) $ 6 Per Unit Relevant Cost beause it is variable cost Prduct Level Cost $ - Fixed Cost so not Relevant Fascility Cost $ - Fixed Cost so not Relevant Total Cost for Special oder of 500 Blanckets $ 57 Answer =A-1 Relevant Cost per unit = $ 57 Per unit Answer =A-2 Special order should not be accepted because there is loss of $ 5 per unit Answer = No CALCUALTION OF THE RELEVANT COST FOR SPECIAL ORDER FOR 500 ADDITIONAL UNITS Particulars Amount Remarks Material Cost = $ 26 Per Unit Relevant Cost beause it is variable cost Labour Cost $ 22 Per Unit Relevant Cost beause it is variable cost Manufacturing Supplies $ 3 Per Unit Relevant Cost beause it is variable cost Batch Level Cost ($ 1000 X 3 = $ 3,000/ 1000 units) $ 3 Per Unit Relevant Cost beause it is variable cost Prduct Level Cost $ - Fixed Cost so not Relevant Fascility Cost $ - Fixed Cost so not Relevant Total Cost for Special oder of 100 Blanckets $ 54 Answer =A-1 Relevant Cost per unit = $ 54 Per unit Answer =A-2 Special order should be accepted because the special order will give the net profit of $ 10 Per unit Project Shoiuld be Accepted Answer = Yes